When is a person conducting a business or undertaking?

A recent NSW District Court decision, Inspector Nash v Perilya Limited [2018] NSWDC 29 (read decision), looks at the interesting question of when a person is conducting a business or undertaking.

On 28 February 2018, Perilya Broken Hill Limited (PBHL) was convicted of charges under the Work Health and Safety Act 2011 (NSW) (Act). PBHL was a wholly owned subsidiary of Perilya Limited (Perilya), and Perilya was also charged with offences under the Act, arising from the same incident.

Perilya argued it was not conducting a business or undertaking in the operation of the mine.

In the end, the Court found Perilya was not a Person Conducting a Business or Undertaking (PCBU) under the Act.

The prosecution had argued several matters in support of their position, including;

  • Perilya published documents pronouncing that it owned and operated the mine.
  • The HSE Management System Overview was published in the name of Perilya and recorded that the Perilya Board had a role to ensure that effective and appropriate systems were in place to ensure safety controls were adequate.
  • Perilya’s Board received HSE reports in relation to the operation of the mine.
  • Employees of PBHL reported to the Board of Perilya about HSE at the Mine.

Relevantly, Perilya underwent significant changes in 2008, because of the Global Financial Crisis. This included:

  • Downsizing its Perth office from 40 people to 8.
  • Establishing PBHL as a standalone business as Perilya had no staff to provide support services.
  • Disbanding the HSE board subcommittee, after which Perilya did not have any committee dealing with health and safety, either in its own operations or any of the entities it owned.
  • The PBHL board had responsibility for HSE, including developing its own policies and procedures.
  • The Perilya board was responsible for oversight functions, rather than hands-on management and had no day-to-day involvement in the activities of PBHL.

After the downsizing the only operating asset was PBHL and it was made a standalone business unit.  It had the necessary people, facilities, capability and assets to conduct business activities without support from a corporate office.

The Court noted Perilya:

 … could have controlled everything that happened at [PBHL] but did not have the resources to.

With respect to HSE reporting, the Court said:

The Perilya board considered HSE reports, but did not make any decision on them. The HSE reports considered by the Board were the consolidated group reports rather than the individual reports from the subsidiaries. To comply with its disclosure and reporting obligations, Perilya would need to keep abreast of matters that could affect its share value, financial position or reputation. HSE would fall within that. It was by reason of Perilya’s disclosure obligations that it received reports.

And

The Perilya Board received a budget from PBHL annually or more frequently. The budget had an impact on Perilya. Likewise, for reasons of disclosure and reporting, Perilya necessarily had to receive this information.

In the end, the Court looked at the practical application of the relationship between PBHL and Perilya. The Court recognised it did not matter that Perilya could have chosen to take over and run the mine.  Being able to take over and run the mine because it was the sole shareholder of PBHL did not make Perilya a PCBU, rather:

It is what was happening in practice that is important

In practice, with only eight staff in Perth, it was impractical for Perilya to be involved in the operation of the mine, and day-to-day management of the mine was in the hands of PBHL.  The Court also said PBHL could change the HSE system without referring to Perilya.

This is not a case of Perilya transferring its duty to another. Nor is it a case of an agreement or arrangement purporting to limit its capacity to influence and control the matter in respect of which it had a duty. This is a case of Perilya ceasing to have control of the mine and its operations. Control must be more than a legal right to control otherwise every parent company with a 100% shareholding of a subsidiary would be, without more, under a duty under s19.

The Perilya decision shows that a close relationship between corporate entities is not enough to make either of them a PCBU.  What must be established is that an entity was conducting a business or undertaking, and in each case, this requires an examination of the relationship between the entities and their role in the relevant business or undertaking.

Swearing at work: Where are we now?

Many employers regard swearing and inappropriate language at work as misconduct, and often grounds for dismissal.  Unfair dismissal claims and other cases which consider swearing in the workplace recognise that abusive language can be misconduct, although it is another question again whether the “misconduct” justifies termination of employment.

On 23 February 2018, the full bench of the Fair Work Commission handed down its decision in Illawarra Coal Holdings Pty Ltd T/A South 32 v Matthew Gosek [2018] FWCFB 749, another case considering inappropriate language in a workplace context.

Illawarra Coal had employed Mr Gosek for more than 11 years, and he was the Lodge President for the Construction, Forestry, Mining and Energy Union (CFMEU).

A member of the CFMEU had made a complaint about a manager at Illawarra Coal, and Mr Gosek had represented the member in relation to this complaint.

The allegations in the complaint were not proven.

On 4 October 2016, Mr Gosek, who was not rostered for work, went to the pub and was drinking. During the afternoon Mr Gosek sent a text message to seven of his colleagues and his supervisor. The text message said “dogs”. The employees rang Mr Gosek to discuss the text. Mr Gosek could not remember what he said in these conversations, but it was not contested:

  • The phone calls involved tense and heated discussions.
  • Mr Gosek used inappropriate language and called his colleagues a variety of names including “f**king dog” and “dog c***”.
  • Mr Gosek was under the influence of alcohol at the time.

This outburst was related to the workers participation in the incident investigation, or as the Commissioner described it:

Mr Gosek intended to convey to his colleagues his disappointment as Lodge President about their role in the investigation and his view that they had not upheld union principles and they had lied to the investigator.

When the case was first heard, the Commissioner found that Illawarra Coal had a valid reason to end Mr Gosek’s employment, but the termination was harsh, unjust, or unreasonable and ordered Mr Gosek be reinstated.  One of the factors influencing the decision was a finding by the Commissioner that the type of language used was “commonly used in the mine”.

Illawarra Coal successfully appealed the decision.

While there were multiple grounds of appeal canvassed in detail by the Full Bench, regarding the specific conduct, two Commissioners found:

by focusing on the language and not the totality of the conduct the Commissioner downplayed the character of the conduct. The problem was not that Mr Gosek swore at this work mates. The conduct involved an expletive filled tirade which included threats directed at employees because they participated in an investigation.

In part the case is indicative of the difficulties faced by employers when assessing this type of conduct, because Commissioner Booth rejected the appeal, noting:

Although the conduct of the Mr Gosek on the day in question was clearly inappropriate, for the reasons detailed in this decision, the Commissioner took into account the conduct of the applicant and a range of other matters and concluded that the termination of Mr Gosek ’s employment was also unfair. That is, the decision reached by the Commissioner was that Mr Gosek’s behaviour was unacceptable but explainable. Therefore a finding the dismissal was unfair was available to the Commissioner. No error is revealed.

In my view, the case reinforces, rather than gives any new direction, about inappropriate language in the workplace.  The principles we can take away from decided cases, including this one are:

  • Prior warnings and repeat offences of swearing or inappropriate language in the workplace will support an employer’s decision to dismiss an employee.
  • Even if swearing is common in the workplace, it must be considered in context. It is one thing to swear in a general sense, it is another thing to swear aggressively and maliciously at another person, which is more likely to support a decision to dismiss an employee.
  • A single isolated incident of swearing, even directed at a person, is unlikely to justify dismissal.
  • While swearing, inappropriate language, or inappropriate behaviour, can be a valid reason for dismissing an employee, the dismissal must still be “fair”. Generally, this means that an employer must:
    • Give the employee an opportunity to explain their conduct;
    • Consider the conduct in context – why did it occur and were there any mitigating factors?
    • Consider the circumstances of the employee and any factors relevant to them, such as length of employment or prior performance.

Whilst misconduct cases often present difficulties for an employer, setting up clear processes to investigate and address misconduct while avoiding the temptation to “rush to judgement” will give you the best chance to successfully manage the situation.

Workplace bullying: Understanding the legal labyrinth

Recent allegations about workplace bullying and workplace conduct in public authorities in Western Australia have thrown the legal context of workplace behaviour into sharp relief.

Workplace “bullying”, while having a specific meaning in legislation, has become somewhat of a catchall phrase for a range of workplace behaviour spanning several legal contexts.

Historically, bullying has been understood as an employment issue, often in the context of discrimination or harassment.  From time to time, bullying has crossed into the workplace health and safety jurisdiction, but in most cases, this happens when the “bullying” results in some sort of physical outcome.  For example, the Café Vamp case involved prosecutions under Victorian health and safety legislation, with significant fines for the employer and several individuals following horrific workplace bullying leading to a young worker suiciding.

In another case, a New South Wales company and two of its directors were prosecuted when a 16-year-old worker was physically assaulted in a workplace “hazing” (Inspector Gregory Maddaford v M A Coleman Joinery (NSW) Pty Ltd).  It will be interesting to see what regulatory or legal approaches authorities will take in relation to the recent allegations of hazing at university colleges.

In an article published by ABC News online on 28 February 2018, the city of Perth was allegedly accused by staff of creating an “unsafe workplace” because of “sustained and persistent poor conduct” by elected members.  The article goes on to explain successive CEOs had taken leave, variously described as “stress” and “personal” leave, allegedly caused by breaches of an employment contract in one case and an “unsafe workplace environment” another.

Another article posted by ABC News Online reports that WorkSafe Western Australia is investigating the Southern Ports Authority over allegations of a “toxic culture of workplace bullying” in the Authority.

This last example shows a shift in attitude by the regulator, away from physical harm to investigating allegations of bullying in their own right.

We have also seen examples where an employer’s response to concerns about behaviour in the workplace can result in psychological harm and consequent legal proceedings.  For example, in Campbell v Woolworths [2017] NSWWCC 213, an employer was liable for an employee’s major depressive disorder following a workplace investigation.

Whatever the headline descriptor might be, bullying, harassment, discrimination and so on, it is apparent “psychological harm” issues arising from this behaviour cut across a raft of legal frameworks including unfair dismissal and general protections claims under the Fair Work Act, harassment and discrimination claims under various state and Commonwealth legislation, workers compensation claims, workplace health and safety legislation and in some cases the criminal law, for offences such as assault.  I am sure there are others.

Workplace behaviour and the potential harm it can cause is a significant workplace risk.  Employers need to make sure they have adequate processes to minimise the risk of inappropriate behaviours and respond to them if they occur.  The content of those processes will vary from organisation to organisation, but I think we can say with some confidence, just relying on Employee Assistance Programs will not be enough.

For the health and safety industry the whole concept of workplace behaviours and psychological harm is a fundamental challenge to the entire structure of how we do business.  At the most basic level, and I have written about this before, there is an arguable case that current practice of health and safety contributes to psychological harm in the workplace.

But, even if you are not prepared to go that far, I think it is strongly arguable that health and safety legislation, regulators, and health and safety practitioners are not well-equipped to deal with the complex environment of psychological harm.  Health and safety legislation in Australia, despite the deference we might have to the concept of “health”, is fundamentally concerned with fatalities and significant physical injuries in blue-collar work – mining, construction, agriculture, oil and gas and so on.  Almost exclusively, inspectors working for health and safety regulators come from a technical, operational or engineering background – at least the ones who appear on site.  The health and safety industry is built on an engineering paradigm, very well-equipped to deal with heavy industry, but poorly disposed to the management of people and their psychological well-being.

This whole discussion, in my view, is made more interesting because Safe Work Australia is currently asking for comments as part of their review of the model WHS laws.  Unlike the lost opportunity that was the introduction of WHS laws in the first place, let’s hope this review can look beyond the narrow, 1970s approach to workplace health and safety and try to incorporate all (or some) of the complexities of a modern working environment.  Further, let’s hope the review looks beyond the narrow self-interest of the health and safety industry to incorporate the whole spectrum of concerns about workplace “well-being”, including compensation, discrimination, harassment, employment relationships and so on.

In a modern, sophisticated society, personal well-being at work should not be an elaborate version of the Monty Hall Problem, nor left to the whim of regulators and their choice of which cases to pursue.  Any serious conversation about WHS legislation would include, at a minimum, alignment with workers compensation legislation but should understand and incorporate – or at least align to – employment and discrimination legislation.

 

Policies, procedures, stress and the safety paradox

Something I have often observed over the years I have been commenting on health and safety management, is the Safety Paradox. The Safety Paradox supposes initiatives for health and safety have the capacity to improve safety outcomes, but also the unintended potential to undermine safety.

These days, it seems stress and other forms of psychological harm are at the forefront of human resources and health and safety management. I cannot go a day, it seems, without seeing an article about workplace stress and what we should be doing about it.

All of the Australian health and safety regulators have adopted programs and publish guidance material on workplace stress and what employers should be doing about it.

However, what I do not see, is a self critical reflection by the health and safety industry, questioning the extent to which our health and safety practices contribute to psychological harm in the workplace.

Could health and safety be doing harm?

What has emerged, at least to my mind, is the extent to which our policy, procedure and policing approach to safety and health, far from alleviating psychological harm in the workplace, might be contributing to it.

Safety management might be part of the problem.

In a Western Australian inquiry into the possible impact of fly in/fly out work on “mental health” the Australian Medical Association identified the way health and safety is managed can contribute to a “distinct sense of entrapment” (page 43):

The AMA also expressed its concerns about this issue, noting that “[o]nerous rules, safety procedures and focus on achievement of production levels have been shown to create a distinct sense of entrapment in FIFO workers.”

The inquiry drew, in some measure, on an earlier report, the Lifeline WA FIFO/DIDO Mental Health Research Report 2013 which also appeared to note the adverse impact of safety and health management on psychological well-being. For example “[a]dhering to on-site safety rules” was identified as a workplace stress (page 77). Interestingly, the Lifeline report noted a sense of “intimidation” brought on by the number of rules and regulations associated with work on a mine, and :

This sense of intimidation was further mirrored in the outcomes of mining safety regulations which in theory were designed to care for workers but in practice led to inflexible regulation over genuine safety concerns (page 81).

Examples from the Lifeline report include:

… a participant recalled a situation in which a worker handling heavy loads required an adhesive bandage but was unable to ask someone to get them for him because he had to fill out an accident report first (which he was unable to do mid-job); hence he had to carry on working without attending to his cuts. Alternatively, another example of the application of safety rules in an inflexible manner was illustrated when a group of workers were reprimanded for not wearing safety glasses on a 40 degree day even though they could not see from them due to excessive sweating. Hence, safety rules themselves were accepted as a necessary part of work but their implementation in an inflexible uniform manner created stress as workers felt their impact hindered their ability to conduct basic work tasks safely and/or without attracting rebuke. Hence, site rules and regulations could translate into arbitrary and punitive forms of punishment, which undermined participants’ ability to fulfil jobs to their satisfaction and left them feeling insecure with their positions (page 81).

It seems, then, we need to think beyond our own perceptions of what might contribute to workplace stress and understand the impact that our efforts to manage health and safety might actually be having. Again, as the Lifeline research noted:

… although past research has shown that site conditions and cultures, such as isolation and excessive drinking are problematic, this research shows that the regimented nature of working and living on-site also takes a toll on mental health and wellbeing. From the responses of many participants, it was apparent that following site safety rules (either under pressure of internal monitoring or in the perceived absence of adequate safety precautions by co-workers and supervisors) was a significant stressor. Participants felt unable to apply self-perceived common-sense judgments and also reported feeling vulnerable to intensive scrutinising, intimidation and threats of job loss (page 82) [my emphasis added].

The common criticisms of safety management and its emphasis on process, controlling behaviour and discipline seem to go directly to factors identified as contributing to psychological harm in the workplace. The pressure to comply with rules, fear about reporting incidents, the inability to exercise individual judgement on how to manage risk and the inflexible application of process are all side-effects of process driven safety.

It is also going to be interesting to see how health and safety regulators, often the champions of paperwork and process, oversee potential impacts of systems on psychological harm in the workplace. Indeed, it would be very useful to see what risk assessments, research or other measures are taken by regulators prior to issuing improvement notices, or giving instructions to workplaces about how to manage risks.

Does the health and safety industry understand the potential effects of their interventions, or undertake any research to understand the potential harm our health and safety intervention may cause?

Gallifreyan_20150512223239

Termination of Work Health and Safety Officer

A recent Fair Work Commission decision, considering the dismissal of a Work Health and Safety Officer in Queensland, provides some useful commentary about the importance of health and safety personnel not just escalating health and safety concerns, but pursuing those concerns. The case also reminds health and safety personnel to exercise good personal due diligence in their role.

The case, Mr Anthony Nieberg v The Heran Building Group Pty Ltd T/A Heran Building Group [2017] FWC 6225, concerned an unfair dismissal claim by Mr Nieberg, a safety officer employed by Heran for about 15 months before they terminated his employment.

From an unfair dismissal perspective, there is nothing remarkable about the case. It is consistent with the principles governing termination of employment, which at its most basic requires a “valid” reason to end the employment relationship, and the employer exercises their right to terminate, based on that valid reason, “fairly”.

Heran defended the claim, saying they dismissed Mr Nieberg because he did not adequately perform his duties as a safety officer, he was issued three written warnings about his performance, but his performance did not improve.

Mr Nieberg oversaw safety on several building sites, and there was evidence in the case about concerns regarding safety on the sites. For example, a town planning and project consultant who had been working for Heran for over seven years wrote to the company about the danger the Heran sites posed and how the sites were not compliant with safety requirements.

The evidence showed safety issues were not being addressed despite warnings Heran gave to Mr Nieberg. The Commission formed the view Mr Nieberg was not taking the appropriate steps to confront the issues on site, or to raise “directly and assertively with the Directors of Heran his concern that site supervisors were simply not doing as he instructed” [my emphasis added] (see paragraph 96).

Mr Harris gave evidence for Mr Nieberg. Mr Harris had been a safety advisor for Heran for just under three months from June until September 2017. Mr Harris told the Commission he was not backed up by management “with health and safety rectifications”, and suggestions he made about safety did not mean much to the supervisors on-site “because they were protected as long as the progress of the sites continued without interruption” (see paragraphs 82 and 83).

Mr Harris said the culture on-site caused him to resign.

The Commission took Mr Harris’s evidence into account, but noted:

I have taken into account the evidence of Mr Harris that was to the effect that he resigned because of what he described as a poor culture of compliance, and because management did not back him up. This would have been of more assistance to Mr Nieberg had Mr Nieberg demonstrated he had been escalating issues to management and actively pursuing enforcement of safety however there is little evidence to prove that he was (see paragraph 105).

The Commission said, Mr Nieberg had “a position of considerable accountability and responsibility” but appeared to be of the view, “if a safety matter had been reported he had fulfilled his responsibility and it was then over to management”:

Mr Nieberg tended to seek to deflect responsibility for the identified safety deficiencies to either site supervisors, or directors for not supporting him. However given Mr Nieberg’s level of responsibility it fell to him to take action when others failed to comply with their safety obligations. I am inclined to accept that he did not escalate issues and insist on consequences being imposed on a failure to comply despite clear warnings that this was expected of him (paragraph 99).

The Commission found:

Heran had a valid reason to dismiss Mr Nieberg based on his performance over an extended period as Safety Officer in not taking measures necessary to ensure Heran’s jobs sites complied with workplace health and safety legislation and other safety related obligations, or to assertively escalate matters when personnel failed to comply with the relevant safety requirements (paragraph 107).

A lack of management support for health and safety is a common, and often very justified, complaint by health and safety personnel.

What this case illustrates is health and safety personnel, by virtue of their position, have to do more than simply raise concerns with management. There is an ongoing and positive obligation to pursue those issues and follow them up.

Moreover, the case reminds health and safety personnel to exercise personal due diligence in relation to their role. Specifically, health and safety personnel should keep good records of what they do in their role, what concerns they identify and raise about health and safety, how they deal with those concerns and how concerns are escalated and managed.

A benefit of health and safety personnel exercising good personal due diligence in relation to their obligations, is they will be better placed to help other managers understand and exercise personal due diligence in relation to health and safety.

 

 

 

 

Due Diligence Workshop

On 1 and 2 February 2018, Dr Robert Long and I will be hosting a due diligence workshop at the Wayside Chapel in Sydney.

This is the second time we have run the due diligence program at the Wayside Chapel, a truly unique learning environment where participants are exposed to the challenges of risk management working amongst some of the most disadvantaged people in the country.

You can find more information about the program HERE.

You can also review a discussion Rob and I had about due diligence, as part of our book, Risky Conversations: The law, social psychology and risk.

 

 

Health and safety assurance – a response part II

In response to an earlier post about health and safety assurance that was shared on LinkedIn, I received several questions. I thought the questions deserved a bit more consideration than simply trying to respond via LinkedIn, so I have slightly paraphrased the questions below and responded.

Has any organisation presented to the courts their corporate risk register and the workplace or general risk register (sometimes called hazard registers)?

Not in any case I have been involved in. The risk register is often irrelevant by the time you get to legal proceedings.

The risk register would only show the company:

  • Was aware of the relevant hazard;
  • Understood the risk presented by the hazards; and
  • Had controls in place to manage the hazard.

These things can be shown by other evidence, such as policies, procedures and so on, which means the risk register is not necessary as evidence.

There are examples where risk registers have been used against companies to show things like a poor understanding of risk, a lack of controls, incomplete action items, registers not being updated after incidents and so on. This was the case in the Pike River Royal Commission.

For what it is worth, I have never reviewed a client’s risk register and thought it would be helpful in a prosecution.

Has any organisation presented their incident register, which should list all accidents, incidents, near misses first aid cases etc.?

Not in any case I have been involved in. However, once again there are cases where a company’s previous incidents have been used against them in proceedings.

In the Pike River Royal Commission, the Commission analysed 1083 incident reports to show that the company did not properly investigate incidents.

In a recent case, Harris v Coles Supermarkets Australia Pty Ltd [2017] ACTSC 81, the company’s incident register was used against them. In that case, worker was injured when they fell off a “safety step”.  The incident register showed that between 2004 and 2009 there were 385 incidents involving the safety step. There were several recommendations made as a consequence of incidents, however the court found that these recommendations were not followed through.

Like risk registers, I have never reviewed client’s incident investigations, or incident register databases and thought it would be helpful in a prosecution.

Based on your experience, how many events were caused by a worker ignoring the procedure that was in place (the reason why they deviated is not my argument here) In other words if the procedure was done to how it was drafted, would the event have occurred?

I do not know about “causation”, and I will explain that in a minute, but most cases do highlight non-compliance with documented safety processes as an issue and criticise the organisation for not enforcing its own procedures.

The “causation” question is not so clear.

For example, in Capon v BHP the court found that BHP did not enforce its own systems of JHA, Take 5 and supervision – the worker had not done JHA’s and Take 5, and the supervisor had not checked them – but this failure was not “causal”.

BHP was convicted because it did not enforce its own system, but the court said the prosecution did not prove beyond a reasonable doubt that the failure by BHP to enforce its own system caused the accident.

If the courts are trying to find out if the SMS was functioning at full ‘capacity’ and assuming it was, does this imply that workers MUST follow the functioning at full ‘capacity’ SMS at all times?

There are a few things in this question.

First, the courts not trying to find out if the “SMS was functioning at full capacity”, but rather whether the company managed its hazards as low (or so far) as reasonably practicable. Having said that, the cases are all reasonably consistent – if you have a safety management system that describes how you are going to manage health and safety risk in the business, you are expected to comply with it – to that extent, it needs to be functioning at, or pretty close to, “full capacity”.

Second, a “one-off” departure from the safety management system by a worker does not automatically create liability for the employer. If the employer can show they had a “proper” system to manage hazards, the system was understood and implemented by the workers and one employee on a rare or “one-off” occasion didn’t follow the system, that is usually defendable

In broad terms, a company can manage safety however it likes. This is subject to any technical legal requirements – for example you must have a safe work method statement for high-risk construction work.

If a company decides to manage health and safety hazards using lots of prescriptive rules, it can do that. It just must show those rules were in place and effective to manage the hazard.

Similarly, if a company decides to manage health and safety hazards by giving the workforce a wide-ranging discretion about how they work, it can do that too. But again, it must show the “system” of managing hazards works.